Future Of 2 Utilities Rides On Indiana Nuclear Decision

October 31, 1985|By Fred Marc Biddle.

The financial distress of electric utilities is nothing new. So when Northern Indiana Public Service Co. in 1981 canceled its $1.8 billion Bailly nuclear power plant, under construction near the Indiana Dunes National Lakeshore, the reaction on Wall Street was somewhere between ho and hum.

Amid reports that Public Service Co. of Indiana might have to cancel a costlier nuclear project, leaving it groping to recover billions of dollars in costs, NIPSCO`s misfortune paled. And the Indiana Public Service Commission in September, 1982, allowed NIPSCO to recover over the next 15 years the $190.7 million it had sunk into the project, less than 1 percent complete when it was canceled.

But a consumer group took the PSC to court. The Indiana appeals court last December overturned the commission`s decision and hinted that neither NIPSCO nor any Indiana electric utility could charge ratepayers for a canceled plant. Should the ruling stand, NIPSCO may face a $100 million-plus writeoff, and analysts say Public Service of Indiana may face bankruptcy over $2.8 billion sunk into its Marble Hill nuclear project.

The Citizens` Action Coalition, the consumer group, expects the Indiana Supreme Court to rule on the utility`s appeal within a few weeks. Meanwhile, the utility plans to appeal a $181 million judgment handed down by a federal jury earlier this month on behalf of a Wyoming coal company that contends NIPSCO broke its supply contract.

In an interview in Hammond, Jack Stine, NIPSCO`s chief operating officer and a senior vice president, said, ``No corporation likes to have an expense of $190 million. But we don`t really anticipate (that in both the Wyoming and Bailly cases) bad decisions are going to happen. . . . It certainly wouldn`t be good news.``

Just as certainly, NIPSCO has discovered that circumstance has made it an unwitting barometer of future decisions about Indiana power-plant construction.

Such consumer groups as Citizens` Action Coalition, which took the PSC to the appeals court, disagree with Stine`s warning that there is ``a danger`` in linking too closely the misfortunes of NIPSCO and Public Service of Indiana.

Phillip King, executive director of the coalition, said, ``We have two abandoned plants and in both cases we have utility companies that said they are in financial (difficulty) because they have abandoned plants, and in both cases they would charge the costs off to consumers.``

Public Service of Indiana officials don`t disagree that there are similarities, and attorneys for that utility busily scribbled away as the Supreme Court last month heard the arguments of the coalition and NIPSCO.

But Public Service insists its fate isn`t sealed, should the lower court`s decision stand.

``We feel that if (NIPSCO`s) case turns out negatively, we will still be able to defend our position,`` said spokesman Mike Goss.

Goss notes that his company canceled Marble Hill reluctantly and under great pressure from state officials, and also that officials reversed their position, because the PSC had as recently as 1983 recommended the plant be completed.

Yet King and other interveners in NIPSCO rate cases have discounted that: They argue a narrow point of utility regulatory law, based on statutes in effect in Indiana and most other states, that a utility cannot recover from ratepayers the cost of a power plant that is not ``used and useful.``

``The issue is whether funds used in an abandoned plant--abandoned for whatever reason--are recoverable,`` said Tom Kieper, utility consumer counselor of Indiana.

Kieper`s view is consistent with the 2-1 decision of the appeals court last December. The court ruled that for the PSC to allow a utility to recover the cost of a canceled plant while denying rate increases to utilities for in- service plants was ``illogical and incongruous to the extreme.``

Public Service canceled Marble Hill construction in January, 1984, following the recommendation of a state panel.